<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
Commission File Number 333-48821
IMPAC Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 23-2923682
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1950 North Ruby Street, Melrose Park, Illinois 60160
(Address of principal executive offices including zip code)
Registrant's telephone number, including area code: (708) 344-9100
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] YES [_] NO
Number of shares of Series A Common Stock, $0.001 par value per share (the
"Series A Common Stock") and Series B Common Stock, $0.001 par value per share
(the "Series B Common Stock" and, together with the Series A Common Stock, the
"Common Stock") outstanding as of the close of business on May 12, 1999:
<TABLE>
<CAPTION>
Class Number of Shares Outstanding
----- ----------------------------
<S> <C>
Series A Common Stock 161,658
Series B Common Stock 4,500
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INDEX
<TABLE>
<CAPTION>
Page
----
<C> <S> <C> <C>
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Statements of Income for
the Three Months Ended March 31, 1998 and 1999.......... 3
Unaudited Condensed Consolidated Balance Sheets as of
December 31, 1998 and March 31, 1999.................... 4
Unaudited Condensed Consolidated Statement of
Shareholders' Equity for the Three Months Ended March
31, 1999................................................ 5
Unaudited Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1998 and 1999...... 6
Notes to Unaudited Condensed Consolidated Financial
Statements............................................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 13
Item 3. Quantitative and Qualitative Disclosures About Market
Risk..................................................... 20
PART II--OTHER INFORMATION........................................... 21
</TABLE>
2
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
IMPAC GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 1998 and 1999
(In thousands)
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Net sales.................................................... $15,801 $64,191
Cost of goods sold........................................... 12,418 46,535
------- -------
Gross profit................................................. 3,383 17,656
Selling, general and administrative expenses................. 2,530 14,330
------- -------
Operating income............................................. 853 3,326
Other income (expense):
Interest income............................................ 6 31
Interest expense........................................... (1,222) (5,625)
Loss on sale of fixed assets............................... -- (28)
------- -------
Income (loss) before income taxes and extraordinary item..... (363) (2,296)
Income (taxes) benefit....................................... 128 502
------- -------
Income (loss) before extraordinary item...................... (235) (1,794)
Extraordinary charge for early retirement of debt, net of tax
benefit of $368............................................. (553) --
------- -------
Net income (loss)............................................ $ (788) $(1,794)
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE>
IMPAC GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31, March 31,
ASSETS 1998 1999
------ ------------ -----------
(unaudited)
<S> <C> <C>
Current assets:
Cash................................................ $ 4,239 $ 8,358
Trade accounts receivable, net of allowances of
$1,517 in 1998 and $1,694 in 1999.................. 44,361 42,356
Other receivables................................... 4,278 3,987
Inventories......................................... 23,982 23,820
Deferred income taxes............................... 3,160 4,034
Prepaids and other current assets................... 1,650 2,552
-------- --------
Total current assets.............................. 81,670 85,107
Long-term assets:
Property, plant and equipment, net.................. 107,669 105,236
Goodwill, net....................................... 163,623 159,340
Deferred financing costs, net....................... 10,449 10,810
Restricted cash..................................... 426 429
Other assets........................................ 2,498 2,544
-------- --------
Total assets...................................... $366,335 $363,466
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Bank overdraft...................................... $ 4,804 $ 4,450
Current maturities of long-term debt................ 5,487 5,267
Trade payables...................................... 20,289 22,248
Accrued expenses.................................... 23,800 21,140
-------- --------
Total current liabilities......................... 54,380 53,105
-------- --------
Long-term debt........................................ 235,072 241,563
Deferred income taxes................................. 10,477 10,252
Other noncurrent liabilities.......................... 823 799
-------- --------
Total liabilities................................. 300,752 305,719
-------- --------
Mandatorily redeemable preferred stock................ -- 15,308
-------- --------
Shareholders' equity:
Common stock, series A, $.001 par value; 1,000,000
shares authorized, 191,746 and 161,658 shares
issued and outstanding at December 31, 1998 and
March 31, 1999, respectively....................... 0 0
Common stock, series B, $.001 par value; 50,000
shares authorized, 4,500 shares issued and
outstanding at December 31, 1998 and March 31,
1999............................................... 0 0
Paid in capital..................................... 98,625 79,819
Warrants outstanding................................ -- 4,207
Carryover basis adjustment.......................... (37,143) (37,143)
Accumulated other comprehensive income.............. (681) (6,798)
Retained earnings................................... 4,782 2,354
-------- --------
Total shareholders' equity........................ 65,583 42,439
-------- --------
Total liabilities & shareholders' equity.......... $366,335 $363,466
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
IMPAC GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three Months ended March 31, 1999
(In thousands except number of shares)
<TABLE>
<CAPTION>
Common Stock Accumulated
---------------- Carryover Other
Number of Paid-in Warrants Basis Comprehensive Retained
Shares Amount Capital Outstanding Adjustment Income Earnings Total
--------- ------ ------- ----------- ---------- ------------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1998................... 196,246 $-- $98,625 $-- $(37,143) $ (681) $4,782 $65,583
Issuance of stock
warrants............... -- -- -- 4,207 -- -- -- 4,207
Repurchase of common
stock.................. (30,088) -- (18,806) -- -- -- -- (18,806)
Accretion of mandatorily
redeemable preferred
stock.................. -- -- -- -- -- -- (634) (634)
Cumulative translation
adjustment............. -- -- -- -- -- (6,117) -- (6,117)
Net income (loss)....... -- -- -- -- -- -- (1,794) (1,794)
------- ---- ------- ------ -------- ------- ------ -------
Balance at March 31,
1999................... 161,658 $ -- $79,819 $4,207 $(37,143) $(6,798) $2,354 $42,439
======= ==== ======= ====== ======== ======= ====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
IMPAC GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1998 and 1999
(In thousands)
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss).......................................... $ (788) $(1,794)
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities--
Extraordinary charge for early retirement of debt........ 553 --
Depreciation and amortization............................ 751 4,677
Amortization of goodwill................................. 42 1,018
Loss on sale of fixed assets............................. -- 28
Deferred income taxes.................................... (188) (1,099)
Changes in assets and liabilities--
Trade accounts receivable, net......................... 628 2,005
Inventories............................................ (1,553) 162
Trade payables and bank overdraft...................... 654 1,605
Other assets and liabilities........................... (1,426) (3,700)
------- -------
Net cash provided by (used for) operating activities. (1,327) 2,902
------- -------
Cash flows from investing activities:
Capital expenditures....................................... (814) (4,735)
Acquisition of AGI Incorporated, net of cash acquired...... (63,551) --
------- -------
Net cash used for investing activities............... (64,365) (4,735)
------- -------
Cash flows from financing activities:
Net change in borrowings under revolving credit line....... -- 8,705
Repayment of long-term debt................................ (29,850) (253)
Proceeds from senior subordinated notes.................... 100,000 --
Change in capital leases................................... -- (1,317)
(Increase) decrease in restricted cash..................... 221 (3)
Proceeds from issuance of common stock..................... 4,600 --
Repurchase of common stock................................. -- (18,806)
Proceeds from issuance of preferred stock and stock
warrants.................................................. -- 18,881
Change in deferred financing costs......................... (4,298) (771)
------- -------
Net cash provided by financing activities............ 70,673 6,436
------- -------
Effect of exchange rate differences on cash.................. -- (484)
------- -------
Increase (decrease) in cash.................................. 4,981 4,119
Cash, beginning of period.................................... 194 4,239
------- -------
Cash, end of period.......................................... $ 5,175 $ 8,358
======= =======
Supplemental Cash Flow Information:
Interest paid.............................................. $ 731 $ 7,764
Income taxes paid.......................................... 161 659
</TABLE>
The accompanying notes are an integral part of these financial statements
6
<PAGE>
IMPAC GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 1--Basis of Presentation
The interim unaudited condensed consolidated financial statements presented
herein include the accounts of IMPAC Group, Inc. ("IMPAC") and all of its
domestic and foreign wholly-owned subsidiaries (together, the "Company"). All
intercompany transactions have been eliminated in consolidation.
These interim condensed consolidated financial statements have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission (the "SEC"). In the opinion of
management, the accompanying unaudited condensed consolidated financial
statements are presented on a basis consistent with audited financial
statements and contain all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial position, results of
operations and the changes in cash flows at March 31, 1999 and for all periods
presented.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These financial statements should
be read in conjunction with the audited financial statements as of and for the
year ended December 31, 1998 in the Company's Form 10-K as filed with the SEC.
Note 2--Acquisitions
Acquisition of AGI Incorporated--
On March 12, 1998, KFI Holding Corporation ("KFI"), the parent company of
Klearfold, Inc. ("Klearfold"), acquired all of the common stock of AGI
Incorporated ("AGI") for $69.0 million including $54.6 million of cash and
$14.4 million of newly issued common stock, plus acquisition costs.
Concurrently, KFI funded the retirement of $8.3 million of indebtedness
outstanding under AGI's credit facility immediately prior to the transaction.
The acquisition was funded by the proceeds from the issuance of $100.0 million
of 10 1/8% Senior Subordinated Notes due 2008 ("Senior Subordinated Notes")
and $4.6 million of new common stock. Upon consummation of this acquisition,
KFI changed its name to "IMPAC Group, Inc."
Acquisition of Tinsley Robor plc--
On September 11, 1998, the Company acquired the common stock of Tinsley
Robor plc (subsequently renamed IMPAC Europe Limited and referred to
hereinafter as "Tinsley") for $137.7 million plus acquisition costs.
Concurrently, the Company funded the retirement of $18.5 million of
indebtedness outstanding under Tinsley's credit agreements immediately prior
to the transaction. The acquisition was funded through additional borrowings
of $93.7 million under the Company's Amended and Restated Multicurrency Credit
Facility dated as of July 7, 1998 (the "Credit Facility"), $58.6 million in
proceeds from the sale of common stock to the Company's existing stockholders
or their affiliates and the issuance, in aggregate, of $8.5 million of five
year promissory notes to former Tinsley shareholders.
Acquisition of Music Print B.V.--
On November 24, 1998, the Company purchased the outstanding capital stock
of Music Print B.V. ("Music Print"), a Netherlands limited liability company,
for approximately $5.3 million plus acquisition costs. Concurrently, the
Company retired approximately $0.2 million of historical indebtedness of Music
Print and purchased the facility in which Music Print operates for $1.3
million. The acquisition was funded through additional revolver borrowings
under the Credit Facility.
7
<PAGE>
IMPAC GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Unaudited Pro Forma for Acquisitions--
The acquisitions of AGI, Tinsley and Music Print have been accounted for as
a purchase and, accordingly, their operating results have been included in the
Company's consolidated financial statements from the dates of acquisition. The
following unaudited pro forma information for the three months ended March 31,
1998 presents certain operating data calculated to reflect the acquisitions of
AGI and Tinsley and the additional borrowings incurred to fund those
acquisitions as if they occurred as of January 1, 1998.
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
March 31,
---------
1998 1999
----------- -------------
(Pro forma) (As reported)
<S> <C> <C>
Net sales....................................... $57,817 $64,191
Net income (loss)............................... (2,221) (1,794)
</TABLE>
This pro forma data does not purport to represent what actual operating
results would have been had the acquisitions been consummated on the dates
indicated or what such results will be for any future period.
Note 3--Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, March 31,
------------ ---------
1998 1999
---- ----
<S> <C> <C>
Raw materials...................................... $ 9,597 $ 9,040
Work in process and finished goods................. 14,385 14,780
------- -------
$23,982 $23,820
======= =======
</TABLE>
Note 4--Equity
Preferred Stock Issuance and Common Stock Repurchase--
On January 12, 1999, IMPAC issued 20,000 shares of Series A Mandatorily
Redeemable Preferred Stock (the "Preferred Stock") with a face value of $20.0
million together with detachable, ten-year warrants (the "Warrants") to
purchase 6,913 shares of Series A Common Stock at an exercise price of $0.01
per share, for net proceeds of $18.9 million. IMPAC used the net proceeds from
the sale of Preferred Stock to acquire 30,087 shares of outstanding Series A
Common Stock. The Preferred Stock accrues dividends on a cumulative basis at
14% per annum for years 1-5, 15% per annum for year 6, and either 14% or 15%
per annum for years 7-10 depending on whether the dividends are paid in cash
or with additional Preferred Stock, respectively. During the first six years
after issuance, dividends on the Preferred Stock are payable solely by issuing
additional shares of Preferred Stock. The Preferred Stock accrues dividends at
24% per annum if certain events occur, including an event of non-compliance as
defined and certain significant changes in the ownership of IMPAC. IMPAC is
required to redeem all outstanding shares of Preferred Stock on December 31,
2008 at face value plus all accrued and unpaid dividends. IMPAC may redeem
some or all outstanding shares of Preferred Stock at an earlier date,
provided, however, that a premium of up to 10% be paid. The Preferred Stock is
not redeemable at the option of the holders of Preferred Stock. The Preferred
Stock contains covenants, among others, limiting additional indebtedness,
restricted payments, guaranties, advances to affiliates, mergers, asset sales
and dispositions. The Preferred Stock ranks senior to all classes of common
stock with respect to dividend distributions and distributions upon the
liquidation or dissolution of IMPAC.
8
<PAGE>
IMPAC GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Upon issuance of the Preferred Stock, the Warrants were valued at $4.2
million and the shares of Preferred Stock were valued at $14.7 million. The
difference between the carrying value and the face value of the Preferred
Stock, along with dividends accrued, is being accreted using the effective
interest rate method over the period the Preferred Stock is outstanding, and
is recorded directly to retained earnings.
Stock Options--
In connection with the acquisition of Tinsley, the Company offered former
Tinsley optionholders the opportunity to either exercise their existing
options in Tinsley for cash or to convert their options into options of the
Company. Pursuant to this offer, on February 27, 1999, the Company granted
options to purchase approximately 3,457 shares of Series B Common Stock of the
Company at a weighted average exercise price of $303. Additionally, on March
31, 1999, the Company granted options to purchase approximately 8,900 shares
of Series A Common Stock of the Company at an exercise price of $513, the
estimated fair market value at that date, to certain key Tinsley employees.
The options to purchase Series A Common Stock vest over a four-year period.
Note 5--Comprehensive Income
Prior to the acquisition of Tinsley, the Company had no amounts to report
as other comprehensive income pursuant to Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income." The Company's
comprehensive income consisted of the following:
<TABLE>
<CAPTION>
Three Months
Ended March
31,
--------------
1998 1999
----- -------
<S> <C> <C>
Net income (loss)........................................ $(788) $(1,794)
Foreign currency translation adjustment.................. -- (6,117)
----- -------
Comprehensive income (loss).............................. $(788) $(7,911)
===== =======
</TABLE>
Note 6--Segment Information
The Company operates in one business segment, providing specialty packaging
for various consumer products markets. During the third quarter of 1998, the
Company expanded its specialty packaging operations geographically to include
the United Kingdom and Europe. The following table presents sales and other
financial information for each geographic region as of and for the three
months ended March 31, 1999:
<TABLE>
<CAPTION>
Operating Identifiable
Geographic Regions Sales Income Assets
------------------ ------- --------- ------------
<S> <C> <C> <C>
United States.............................. $35,381 $2,592 $141,557
U.K. and Europe............................ 28,810 1,311 211,248
------- ------ --------
Total geographic segments.................. 64,191 3,903 352,805
Unallocated corporate expense.............. -- (577) --
Corporate assets........................... -- -- 10,661
------- ------ --------
Consolidated totals........................ $64,191 $3,326 $363,466
======= ====== ========
</TABLE>
9
<PAGE>
IMPAC GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 7--Guarantors and Financial Information
The following unaudited condensed consolidating financial information is
presented for purposes of complying with the reporting requirements of the
subsidiaries of IMPAC that have guaranteed IMPAC's obligations with respect to
the Senior Subordinated Notes (the "Subsidiary Guarantors"). The Subsidiary
Guarantors are directly or indirectly wholly-owned subsidiaries of the Company
and have fully and unconditionally guaranteed the Senior Subordinated Notes on
a joint and several basis. During the three months ended March 31, 1999,
certain foreign subsidiaries of the Company that were formed or acquired in
connection with the acquisition of Tinsley provided full and unconditional
guarantees on the Senior Subordinated Notes and are included in the unaudited
condensed consolidating financial information below as Subsidiary Guarantors.
Separate financial statements and other disclosures with respect to the
Subsidiary Guarantors are not presented because the Company believes that such
financial statements and other information would not provide additional
information that is material to investors. The unaudited condensed
consolidating financial information presents unaudited condensed consolidating
financial statements as of March 31, 1999 and for the three months ended March
31, 1999 of:
(a) IMPAC on a parent company only basis ("IMPAC Parent"), carrying its
investments in subsidiaries under the equity method;
(b) the Subsidiary Guarantors, which include IMPAC's domestic
subsidiaries AGI Incorporated, Klearfold, Inc., KF-International, Inc., and
KF-Delaware, Inc. and its foreign subsidiaries IMPAC Europe Holdings
Limited, Levelprompt Limited, IMPAC Europe Limited, James Upton Limited,
Tinsley Robor Labels Limited, Tinsley Robor Sales Limited, Sonicon Limited,
Tophurst Properties Limited and Printing Resources Limited, carrying any
investments in subsidiaries under the equity method;
(c) the subsidiaries of IMPAC that have not guaranteed IMPAC's
obligations with respect to the Senior Subordinated Notes, which include
IMPAC's foreign subsidiaries Van de Steeg Packaging B.V., James Upton
Holding B.V., James Upton B.V., James Upton GmbH and Music Print B.V.
(together, the "Non-Guarantor Subsidiaries");
(d) elimination entries necessary to consolidate IMPAC Parent and its
subsidiaries; and
(e) IMPAC on a consolidated basis ("IMPAC Consolidated").
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
Non-
IMPAC Subsidiary Guarantor IMPAC
Parent Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............... $ -- $51,509 $13,188 $(506) $64,191
Cost of goods sold...... -- 37,043 9,998 (506) 46,535
------- ------- ------- ----- -------
Gross profit............ -- 14,466 3,190 -- 17,656
Selling, general and
administrative
expenses............... 577 11,545 2,208 -- 14,330
------- ------- ------- ----- -------
Operating income (loss). (577) 2,921 982 -- 3,326
Equity earnings (losses)
in subsidiaries........ (1,090) 356 -- 734 --
Interest expense, net... (595) (4,679) (348) -- (5,622)
------- ------- ------- ----- -------
Income (loss) before
income taxes........... (2,262) (1,402) 634 734 (2,296)
Income (taxes) benefit.. 468 312 (278) -- 502
------- ------- ------- ----- -------
Net income (loss)....... $(1,794) $(1,090) $ 356 $ 734 $(1,794)
======= ======= ======= ===== =======
</TABLE>
10
<PAGE>
IMPAC GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 1999
<TABLE>
<CAPTION>
Non-
IMPAC Subsidiary Guarantor IMPAC
Parent Guarantors Subsidiaries Eliminations Consolidated
-------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash.................. $ 191 $ 3,791 $ 4,376 $ -- $ 8,358
Trade accounts
receivable, net...... -- 35,862 6,494 -- 42,356
Intercompany
receivables.......... 16,346 2,024 -- (18,370) --
Inventories........... -- 21,852 1,968 -- 23,820
Other current assets.. 91 8,303 2,179 -- 10,573
-------- -------- ------- --------- --------
Total current
assets............. 16,628 71,832 15,017 (18,370) 85,107
-------- -------- ------- --------- --------
Property, plant and
equipment, net....... -- 83,758 21,478 -- 105,236
Goodwill, net......... -- 138,701 20,639 -- 159,340
Intercompany
receivables.......... 165,970 17,191 -- (183,161) --
Investment in
subsidiaries......... 77,042 42,452 -- (119,494) --
Other assets.......... 10,379 2,508 896 -- 13,783
-------- -------- ------- --------- --------
Total assets........ $270,019 $356,442 $58,030 $(321,025) $363,466
======== ======== ======= ========= ========
Current liabilities:
Current maturities of
long-term debt....... $ 1,010 $ 3,180 $ 1,077 $ -- $ 5,267
Trade payables........ -- 20,453 6,245 -- 26,698
Intercompany payables. -- 15,060 20,179 (35,239) --
Accrued expenses...... 410 17,289 3,445 (4) 21,140
-------- -------- ------- --------- --------
Total current
liabilities........ 1,420 55,982 30,946 (35,243) 53,105
-------- -------- ------- --------- --------
Long-term debt.......... 210,852 27,703 3,008 -- 241,563
Other noncurrent
liabilities............ -- 10,997 54 -- 11,051
Intercompany debt....... -- 165,970 -- (165,970) --
-------- -------- ------- --------- --------
Total liabilities... 212,272 260,652 34,008 (201,213) 305,719
-------- -------- ------- --------- --------
Mandatorily redeemable
preferred stock........ 15,308 -- -- -- 15,308
-------- -------- ------- --------- --------
Total shareholders'
equity................. 42,439 95,790 24,022 (119,812) 42,439
-------- -------- ------- --------- --------
Total liabilities and
shareholders' equity... $270,019 $356,442 $58,030 $(321,025) $363,466
======== ======== ======= ========= ========
</TABLE>
11
<PAGE>
IMPAC GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
Non-
IMPAC Subsidiary Guarantor IMPAC
Parent Guarantors Subsidiaries Eliminations Consolidated
-------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net cash provided by
(used for) operating
activities........... $ (2,382) $ 1,272 $ 4,012 $-- $ 2,902
-------- ------- ------- ---- --------
Cash flows from
investing activities:
Capital expenditures.. -- (2,643) (2,092) -- (4,735)
-------- ------- ------- ---- --------
Cash flows from
financing activities:
Net change in
borrowings under
revolving credit
line................. 8,705 -- -- -- 8,705
Repurchase of common
stock................ (18,806) -- -- -- (18,806)
Proceeds from issuance
of preferred stock
and stock warrants... 18,881 -- -- -- 18,881
Loans and advances
(to) from related
parties.............. (3,082) 4,972 (1,890) -- --
Other financing
activities........... (1,024) (919) (401) -- (2,344)
-------- ------- ------- ---- --------
Net cash provided by
financing activities... 4,674 4,053 (2,291) -- 6,436
-------- ------- ------- ---- --------
Effect of exchange
rate differences on
cash................. (2,420) (278) 2,214 -- (484)
-------- ------- ------- ---- --------
Decrease in cash........ (128) 2,404 1,843 -- 4,119
Cash, beginning of
period................. 319 1,387 2,533 -- 4,239
-------- ------- ------- ---- --------
Cash, end of period..... $ 191 $ 3,791 $ 4,376 $-- $ 8,358
======== ======= ======= ==== ========
</TABLE>
12
<PAGE>
ITEM 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
On March 12, 1998, KFI Holding Corporation ("KFI"), the parent company of
Klearfold, Inc. ("Klearfold"), completed both its acquisition of AGI
Incorporated ("AGI") and also the issuance of the Company's 10 1/8% Senior
Subordinated Notes due 2008 ("Senior Subordinated Notes"). Upon consummation
of these transactions KFI changed its corporate name to IMPAC Group, Inc.
("IMPAC" and collectively with its consolidated subsidiaries, the "Company").
On September 11, 1998, IMPAC acquired substantially all of the outstanding
capital stock of Tinsley Robor plc ("Tinsley"). IMPAC funded the acquisition
of Tinsley through borrowings under the Amended and Restated Multicurrency
Credit Facility dated as of July 7, 1998 (the "Credit Facility"), proceeds
from the sale of common stock to IMPAC's existing stockholders or their
affiliates and the issuance of five year promissory notes to former Tinsley
shareholders. References below to the "Company" mean IMPAC Group, Inc. and its
consolidated subsidiaries.
As a result of these transactions, the Company's historical consolidated
financial statements for the three months ended March 31, 1999 and 1998 are
not comparable due to the inclusion in the consolidated financial statements
of AGI's and Tinsley's assets, liabilities and operating results from the
dates of acquisition. Management believes that the pro forma results of
operations for the three months ended March 31, 1998, which assume that the
acquisitions of AGI and Tinsley and the borrowings incurred to fund those
acquisitions occurred as of January 1, 1998, present a more meaningful basis
from which to compare the Company's historical operating results for the three
months ended March 31, 1999. As such, the discussion and analysis of the
historical results of operations and financial position for the three months
ended March 31, 1999 and 1998 are supplemented with the discussion and
analysis of the results of operations and financial position for the
historical three months ended March 31, 1999 compared to the pro forma three
months ended March 31, 1998.
IMPAC is a holding company with no material assets or operations other than
its investments in its wholly-owned subsidiaries. All of the Company's
domestic subsidiaries and certain foreign subsidiaries of the Company have
guaranteed the Senior Subordinated Notes on a full, unconditional, joint and
several basis, subject to the subordination provisions in the related
Indenture (the "Subsidiary Guarantors"). Separate financial statements and
other disclosures of the Subsidiary Guarantors have not been presented in this
Form 10-Q because the Company believes that such financial statements and
other information would not provide additional information that is material to
investors. However, the condensed consolidating financial information of the
parent Company and its Subsidiary Guarantors have been presented in Note 7 of
the Unaudited Condensed Consolidated Financial Statements for purposes of
complying with the reporting requirements.
Overview
The Company is an international designer, manufacturer and marketer of
high-end, value-added specialty packaging for various consumer products
markets including entertainment, cosmetics and personal care. The Company
offers innovative specialty packaging solutions for customers that seek to
differentiate their products in the consumer marketplace. In addition, the
Company utilizes a broad range of paper, paperboard and transparent rigid
plastic materials for its products.
Results of Operations
Historical Three Months Ended March 31, 1999 Compared to Pro Forma Three
Months Ended March 31, 1998
The following table sets forth certain unaudited income statement data
(expressed as a percentage of net sales) for the pro forma three months ended
March 31, 1998 (the "1998 period") and the historical three months ended March
31, 1999 (the "1999 period"). The unaudited income statement data for the
three months ended
13
<PAGE>
March 31, 1998 are presented on a pro forma basis as if the acquisitions of
AGI and Tinsley and the borrowings incurred to fund those acquisitions
occurred as of January 1, 1998.
<TABLE>
<CAPTION>
Three Months Ended March
31,
------------------------
1998 1999
----------- ------------
(Pro forma) (Historical)
<S> <C> <C>
Income Statement Data:
Net sales....................................... 100.0% 100.0%
Cost of goods sold.............................. 72.2% 72.5%
------ ------
Gross profit.................................... 27.8% 27.5%
Selling, general and administrative expenses.... 22.1% 22.3%
------ ------
Operating income................................ 5.7% 5.2%
Interest expense, net........................... 9.2% 8.8%
------ ------
Income (loss) before income taxes and
extraordinary item............................. (3.5%) (3.6%)
Income taxes (benefit).......................... (0.7%) (0.8%)
------ ------
Income (loss) before extraordinary item......... (2.8%) (2.8%)
====== ======
</TABLE>
Net Sales for the 1999 period were $64.2 million compared to $57.8 million
for the 1998 period, an increase of 11.0%. This increase was due to a $4.4
million increase in entertainment packaging, a $1.2 million increase in
cosmetics packaging and a $0.8 million increase in other consumer products
packaging. The entertainment packaging increase was due primarily to an
increase in music packaging sales resulting from improved market penetration
relating to the start-up of the Company's Grover, North Carolina facility in
April 1998 and the acquisition of Music Print in November 1998. The increase
in cosmetics packaging relates primarily to increased volume to the Company's
existing customers resulting from improved sales and marketing efforts and
favorable market conditions. The increase in other consumer products packaging
resulted primarily from an increase in sales of a hologravure label
application for a customer in the personal computer market.
Gross Profit for the 1999 period was $17.7 million compared to $16.1
million for the 1998 period, an increase of 9.7%. The increase in gross profit
was due predominantly to the sales increase noted above. The decrease in gross
margin from 27.8% to 27.5% was due primarily to the integration of Music Print
into the Company's European operations.
Selling, General and Administrative Expenses for the 1999 period were $14.3
million compared to $12.8 million for the 1998 period, an increase of 12.0%.
SG&A as a percentage of sales increased from 22.1% to 22.3%. The increase in
SG&A was due primarily to increased costs associated with the Company's
integration to a new enterprise resource planning ("ERP") system, increases in
anticipated payouts under various compensation programs tied to sales and
profitability and costs associated with the restructuring of certain of the
Company's European operations.
Operating Income was $3.3 million for both the 1999 and 1998 periods due to
the factors discussed above.
Net Interest Expense for the 1999 period was $5.6 million compared to $5.4
million for the 1998 period, an increase of 3.9%. The increase is due
primarily to an increase in revolver borrowings under the Credit Facility.
Income Taxes for the 1999 period were a benefit of $0.5 million compared to
$0.4 million for the 1998 period. The Company's effective rate of tax benefit
for the periods was less than the U.S. federal statutory rate primarily due to
the effect of non-deductible goodwill amortization of approximately $1.0
million in each period.
14
<PAGE>
Net Loss for the 1999 period increased to $1.8 million compared to $1.7
million for the 1998 period due to the factors discussed above. The pro forma
net loss for the 1998 period does not include an extraordinary charge of $0.6
million, net of tax, related to the early extinguishment of debt.
Historical Three Months Ended March 31, 1999 Compared to Historical Three
Months Ended March 31, 1998
The results of operations for the three months ended March 31, 1998 (the
"1998 period") include the results of AGI from March 13, 1998 and do not
include any results of Tinsley. The results of operations for the three months
ended March 31, 1999 (the "1999 period") include the results of AGI and
Tinsley for the entire period. The Company's growth in net sales, gross profit
and operating income during the 1999 period as compared to the 1998 period
relates primarily to the effect of these acquisitions. Net interest expense
increased from $1.2 million in the 1998 period to $5.6 million in the 1999
period due to the additional borrowings incurred to fund the acquisitions of
AGI and Tinsley. Income taxes for the 1999 period were a benefit of $0.5
million compared to $0.1 million for the 1998 period. The Company's effective
tax rates decreased from a benefit of 35.3% in the 1998 period to 21.9% in the
1999 period primarily due to the effect of an increase in non-deductible
goodwill amortization of approximately $1.0 million. The net loss for the 1999
period increased to $1.8 million compared to $0.8 million during the 1998
period due to the factors discussed above. The net loss for the 1998 period
includes an extraordinary charge of $0.6 million, net of tax, related to the
early extinguishment of debt.
Liquidity and Capital Resources
Net cash provided by operating activities for the 1999 period was $2.9
million compared to net cash used for operating activities of $1.3 million for
the 1998 period. Income from operations before non-cash charges increased to
$2.8 million from $0.4 million primarily due to the acquisition of AGI and
Tinsley. In the 1999 period, income from operations before non-cash charges of
$2.8 million, the issuance of Preferred Stock and Warrants, $8.7 million of
revolver borrowings under the Credit Facility and a $0.1 million decrease in
working capital requirements were used to fund the repurchase of common stock,
the repayment of $0.3 million of bank borrowings, $0.8 million of debt
issuance costs, $1.3 million decrease in capital leases and $4.7 million of
capital expenditures. In the 1998 period, income from operations before non-
cash charges of $0.4 million, the issuance of the Senior Subordinated Notes
and Common Stock and $0.2 million of proceeds from the Company's industrial
revenue bonds were used to fund the acquisition of AGI, the repayment of $29.9
million of bank borrowings, $4.3 million of debt issuance costs, $0.8 million
of capital expenditures and a $1.7 million increase in working capital
requirements.
The Company's primary cash requirements historically have related to
capital expenditures, working capital and debt service. The Company has
historically funded these requirements through internally generated cash flow,
borrowings under bank credit arrangements and the issuance of industrial
revenue bonds. The Company currently expects to spend $27.5 million on capital
expenditures in 1999. The Company expects to fund its capital expenditures and
other working capital requirements in 1999 through internally generated cash
flow and borrowings under the Credit Facility.
On January 12, 1999, IMPAC issued 20,000 shares of Series A Mandatorily
Redeemable Preferred Stock (the "Preferred Stock") with a face value of $20.0
million together with detachable, ten-year warrants (the "Warrants") to
purchase 6,913 shares of Common Stock at an exercise price of $0.01 per share,
for net proceeds of $18.9 million. IMPAC used the net proceeds from the sale
of Preferred Stock to acquire 30,088 shares of outstanding Series A Common
Stock. The Preferred Stock accrues dividends on a cumulative basis at 14% per
annum for years 1-5, 15% per annum for year 6, and either 14% or 15% per annum
for years 7-10 depending on whether the dividends are paid in cash or with
additional Preferred Stock, respectively. During the first six years
15
<PAGE>
after issuance, dividends on the Preferred Stock are payable solely by issuing
additional shares of Preferred Stock. The Preferred Stock accrues dividends at
24% per annum if certain events occur, including an event of non-compliance as
defined and certain significant changes in the ownership of IMPAC. IMPAC is
required to redeem all outstanding shares of Preferred Stock on December 31,
2008 at face value plus all accrued and unpaid dividends. IMPAC may redeem
some or all outstanding shares of Preferred Stock at an earlier date,
provided, however, that a premium of up to 10% be paid. The Preferred Stock is
not redeemable at the option of the holders of Preferred Stock. The Preferred
Stock contains covenants, among others, limiting additional indebtedness,
restricted payments, guaranties, advances to affiliates, mergers, asset sales
and dispositions. The Preferred Stock ranks senior to all classes of Common
Stock with respect to dividend distributions and distributions upon the
liquidation or dissolution of IMPAC.
IMPAC is a holding company with no operations of its own. The Company's
ability to make required interest payments on the Senior Subordinated Notes
depends upon its ability to receive funds from its domestic and foreign
subsidiaries. The Company, at its discretion, controls the receipt of
dividends or other payments from its domestic and foreign subsidiaries,
subject in the case of certain foreign subsidiaries to limitations that may be
imposed under the laws of the applicable jurisdictions of organization. These
limitations are not considered to be material to the Company as a whole. There
are no contractual restrictions, under the Credit Facility or otherwise, upon
the ability of the Subsidiary Guarantors to make distributions or pay
dividends, directly or indirectly, to IMPAC.
Since its acquisition of Tinsley, the Company is exposed to currency
exchange rate risk with respect to its net assets, transactions and the
related net income denominated in U.K. Pounds Sterling, Dutch Guilders, Irish
Punts, Austrian Shillings and the Euro. Business activities in various
currencies expose the Company to the risk that the eventual net dollar cash
inflows resulting from transactions with foreign customers and suppliers
denominated in foreign currencies may be adversely affected by changes in
currency exchange rates. The Company is evaluating these risks and developing
its hedging program.
Adoption of New Accounting Standard
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. This statement
is effective for fiscal years beginning after June 15, 1999. Due to the recent
release and complexity of this new standard, an assessment of the impact it
will have on the financial position or results of operations has not been
completed.
Year 2000 Issues
The information provided below constitutes "Year 2000 Readiness Disclosure"
as defined in the Year 2000 Information and Readiness Disclosure Act and is
subject to the terms thereof. The following description of the Company's
remediation process is meant for information purposes and not as a form of
covenant, warranty, representation or guarantee of any kind. In addition, many
of the Company's year 2000-related efforts are dependent upon third parties
that are effectively beyond the Company's control.
General
As many computer systems and other equipment with embedded chips or
processors use only two digits to represent the year, they may be unable to
accurately process certain data during or after the year 2000. This is
commonly known as the year 2000 ("Y2K") issue. The Y2K issue can arise at any
point in an entity's supply, manufacturing, processing, distribution and
financial chains.
IMPAC and its wholly owned domestic subsidiaries, AGI and Klearfold, are
undertaking an initiative entitled IMPAC 2000 (the "Domestic Project"). While
addressing the Y2K issue specifically, the Domestic Project is intended to
change the entire business systems infrastructure and make it Y2K compliant.
16
<PAGE>
The Company believes that Tinsley has substantially addressed the Y2K
issue, with Tinsley's information technology ("IT") systems currently in
compliance with Y2K. With regard to non-IT issues, Tinsley has contacted
vendors who have provided assurances that the relevant systems are in
compliance.
Projects
The Domestic Project is divided into 4 major areas: (i) Infrastructure
Systems, (ii) Applications Software, (iii) Manufacturing Equipment, and (iv)
External Stakeholders. At the present time, the Infrastructure Systems portion
of the project is believed to be complete in so far as it pertains to Y2K.
This includes personal computers, local and wide area networks and telephony.
In addition, desktop environments have been standardized and all such
applications are now believed to be Y2K compliant. At present, the
Applications Software at AGI and Klearfold are different. These systems will
be harmonized with the implementation of the ORACLE ERP system. The Company
has retained an outside consultant to assist in the integration of the
business and systems processes into an ORACLE ERP solution. With respect to
AGI, this implementation is approximately 70 percent complete with full
implementation expected in mid 1999. With respect to Klearfold, a Y2K
compliant patch has been installed to its Applications Software, allowing for
the ORACLE implementation to take place after the year 2000. A contingency
plan for the AGI Applications Software has been developed and is currently in
the testing process. With respect to the Manufacturing Equipment portion of
the project, a comprehensive review of Manufacturing Equipment has been
completed and the Company believes that substantially all significant
equipment is Y2K compliant. With respect to its External Stakeholders, the
Company is in the process of contacting its material suppliers and Electronic
Data Interfaces with third party customers and vendors are in the process of
review.
Tinsley implemented the SAGE accounting application for its UK subsidiaries
in the second half of 1998. The European subsidiaries operate stand alone
accounting systems which the Company believes are Y2K compliant. In addition,
the Company expects that the IMPRINT management information system, which is
used by Tinsley, will become Y2K compliant during the balance of 1999.
Costs
The total cost associated with required modifications to business systems
is not expected to be material to the financial position of the Company. The
estimated cost of the Domestic Project is $8.3 million, of which $3.3 million
was spent through December 31, 1998 and $1.3 was spent in the first quarter of
1999. The residual amount of $3.7 million is to be spent during the remainder
of 1999. The Company will fund the Domestic Project, along with its other
capital expenditures, with internally generated cash flows along with
additional Revolver borrowings, as necessary.
Risks
The failure to correct a material Y2K problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the results of
operations, liquidity and financial condition of the Company. Due to the
general uncertainty inherent with regards to Y2K issues, resulting in part
from the uncertainty of the Y2K readiness of third-party suppliers and
customers, the Company is unable to predict what consequences any Y2K failures
would have on its results of operations, liquidity or financial condition or
on the most reasonably likely worst case scenario. The domestic and foreign
projects will continue to significantly reduce the level of uncertainty about
the Y2K problem and, in particular, about the Y2K compliance and readiness of
its material suppliers. The Company believes that, with the implementation of
the new business systems and completion of the projects listed above as
scheduled, the possibility of significant interruptions of normal operations
should be reduced.
Euro
The European Community introduced a common European monetary unit, called
the Euro, effective January 1, 1999. The UK, where Tinsley is headquartered,
has opted not to adopt the Euro. However, certain subsidiary
17
<PAGE>
operations are in countries such as The Netherlands, the Republic of Ireland
and Austria, which participated in its introduction. The new SAGE system
implemented at Tinsley is capable of handling multicurrency transactions, with
the Euro being a currency in its portfolio. The Company does not believe that
the introduction of the Euro will have a material adverse effect on the
results of its operations. See Liquidity and Capital Resources for further
discussion of currency and exchange rate issues.
Cautionary Note
This Form 10-Q may contain "forward-looking statements" within the meaning
of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934, as amended, including, but not limited to statements
regarding: the redemption by the Company of the Preferred Stock; the funding
of and the projected amount of capital expenditures in 1999; the development
by the Company of a currency hedging program; the impact of the new FASB
statement; the Company's projects with respect to Y2K issues and the
possibility of interruptions caused therefrom; expectations regarding the
Company's Y2K compliance; the effect of the introduction of the Euro; the
Company's ability to incur substantial additional indebtedness; and, certain
other statements identified or qualified by words such as "likely", "will",
"suggests", "may", "would", "could", "should", "expects", "anticipates",
"estimates", "plans", "projects", "believes", or similar expressions (and
variants of such words or expressions). Investors are cautioned that forward-
looking statements are inherently uncertain. Actual performance and results of
operations may differ materially from those projected or suggested in the
forward-looking statements due to certain risks and uncertainties, including,
without limitation, those described below:
. In connection with the consummation of the acquisitions of AGI and
Tinsley, the Company incurred a significant amount of indebtedness and,
as a result, the Company is highly leveraged. Subject to certain
covenants, the Company is permitted to incur substantial additional
indebtedness in the future.
. The Company's ability to make scheduled payments of principal of, or to
pay the interest or liquidated damages, if any, on, or to refinance, its
indebtedness (including the Senior Subordinated Notes), or to fund
planned capital expenditures and any acquisitions will depend on its
future performance, which, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory and other
factors that are beyond its control.
. The Senior Subordinated Notes and the related subsidiary guarantees (the
"Subsidiary Guarantees") are subordinated in right of payment to all
current and future senior debt of the Company and the Subsidiary
Guarantors. The Senior Subordinated Notes indenture (the "Indenture")
permits the incurrence of substantial additional indebtedness, including
senior debt, by the Company and its subsidiaries in the future.
. IMPAC has no operations of its own and derives substantially all of its
revenue from its subsidiaries. Holders of indebtedness and trade
creditors of subsidiaries of IMPAC would generally be entitled to payment
of their claims from the assets of the affected subsidiaries before such
assets were made available for distribution to IMPAC.
. Several of IMPAC's foreign subsidiaries are not required to deliver a
guarantee with respect to the Senior Subordinated Notes. Additionally,
IMPAC is allowed under the Indenture to acquire or create additional
foreign subsidiaries that may not be required to deliver a guarantee with
respect to the Senior Subordinated Notes.
. Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer law, the Senior Subordinated
Notes or the Subsidiary Guarantees, could be voided, or claims in respect
of the Senior Subordinated Notes or the Subsidiary Guarantees could be
subordinated to all other debts of IMPAC or any Subsidiary Guarantor. In
addition, the payment of interest and principal by IMPAC or any
Subsidiary Guarantor pursuant to the Senior Subordinated Notes could be
voided and required to be returned to the person making such payment, or
to a fund for the benefit of the creditors of IMPAC or any Subsidiary
Guarantor.
18
<PAGE>
. Upon a change of control, as defined in the Indenture, the Company will
be required to offer to repurchase all outstanding Senior Subordinated
Notes at 101% of the principal amount thereof plus accrued and unpaid
interest and liquidated damages, if any, to the date of repurchase.
However, there can be no assurance that sufficient funds will be
available at the time of any change of control to make any required
repurchases of Senior Subordinated Notes tendered or that restrictions in
the Credit Facility will allow the Company to make such required
repurchases. Furthermore, upon certain ownership changes, the dividend
rate on the Preferred Stock will increase to 24%.
. Prior to March 1998, the Company had no prior history as a combined
entity and its operations had not previously been managed on a combined
basis. Prior to the combination of AGI and Klearfold in March, 1998 and
the acquisition of Tinsley in September, 1998, AGI, Klearfold and Tinsley
were operated as separate entities. The 1998 historical and pro forma
financial information presented in this Form 10-Q may not necessarily be
indicative of the results that would have been attained had the Company
operated on a combined basis.
. A substantial portion of the Company's business is now conducted in
international markets. Risks inherent in foreign operations, such as
fluctuations in foreign currency exchange rates and changes in social,
political and economic conditions, could materially adversely affect the
Company's business.
. The Company's packaging products are almost entirely targeted to consumer
products companies. Sales of consumer products are subject to changing
tastes and technologies that cannot be predicted. In addition to
technical and new product changes that could affect demand for the
Company's products in traditional distribution channels, demand for the
Company's products could also be materially affected by change in retail
distribution channels, such as the anticipated growth in electronic
commerce distribution channels in which products are sold directly to
customers over the Internet. The Company's success will depend, in part,
upon its continued ability to manufacture products that meet changing
customer needs and industry-wide shifts, successfully anticipate or
respond to technological changes in manufacturing processes on a cost-
effective and timely basis and enhance and expand its existing product
offerings.
. A significant portion of the Company's business is attributable to
special projects relating to particular hit movie or music releases. The
existence and timing of such major releases may cause the Company's
quarterly and annual revenues to vary significantly.
. The Company may in the future pursue selective acquisitions within the
specialty packaging industry. In the event that such acquisitions were to
occur, there can be no assurance that the Company's business, financial
condition and results of operations would not be materially adversely
affected.
. Many of the Company's products are sold in highly competitive markets in
the United States, the U.K. and Europe. Competitive pressures or other
factors could cause the Company to lose existing business or
opportunities to generate new business or could result in significant
price erosion, all of which would have a material adverse effect on the
Company's business, financial condition and results of operations.
. The past and present operations of the Company and the past and present
ownership and operations of real property by the Company are subject to
extensive and changing federal, state and local environmental laws and
regulations pertaining to the discharge of materials into the
environment, the handling and disposition of wastes, the recycling,
composition and recycled content of packaging, or otherwise relating to
the protection of the environment. In addition to the effects of
regulation, the Company's business may also be affected by environmental
concerns of consumers with respect to packaging.
. The Company's majority stockholder or its affiliates and certain members
of senior management own substantially all of the outstanding voting
stock of IMPAC, which is the sole stockholder of AGI, Klearfold and
Tinsley and, by virtue of such ownership, have the power to control all
matters submitted to stockholders of IMPAC and to elect all directors of
IMPAC and its subsidiaries, including AGI, Klearfold and Tinsley.
. The Company's ability to successfully address its Y2K issues will depend
on the availability of resources, the Company's ability to discover and
correct those potential Y2K problems which could have a serious
19
<PAGE>
impact on specific Company facilities and the ability of vendors to bring
their computer systems and other equipment into Y2K compliance.
Risk factors, cautionary statements and other conditions that could cause
actual results to be adversely affected are contained in the Company's filings
with the Securities and Exchange Commission, including the Company's Annual
Report on Form 10-K for the year ended December 31, 1998 (the "1998 Annual
Report") and the foregoing discussion should be read in conjunction with the
Cautionary Note section of Management's Discussion and Analysis of Financial
Condition and Results of Operations of the 1998 Annual Report.
ITEM 3: Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in the Company's market risk exposures
since December 31, 1998.
20
<PAGE>
PART II--OTHER INFORMATION
ITEM 1: Legal Proceedings
None
ITEM 2: Changes in Securities and Use of Proceeds
On January 12, 1999, IMPAC Group, Inc. (the "Company" or the "Registrant")
issued to BT Capital Investors, L.P. and Phoenix Home Life Mutual Insurance
Company, for an aggregate consideration of $20,000,000, (i) an aggregate of
20,000 shares of Series A Mandatorily Redeemable Preferred Stock, $0.001 par
value per share (the "Preferred Stock") and (ii) detachable, ten-year Warrants
to purchase an aggregate of 6,913 shares of IMPAC's Series A Common Stock at
an exercise price of $0.01 per share (the "Warrants"). The Company used the
net proceeds from the sale of Preferred Stock to acquire 30,087 shares of
outstanding Series A Common Stock. The Warrants are exercisable at any time
during the ten-year period subsequent to their issuance. The issuances of such
Preferred Stock and Warrants were made by the Company in reliance on the
exemption from registration provided under Regulation D under the Securities
Act of 1933, as amended. See Note 4 of the Unaudited Condensed Consolidated
Financial Statements.
ITEM 3: Defaults Upon Senior Securities
None
ITEM 4: Submission of Matters to a Vote of Security Holders
On January 8, 1999, the Company's stockholders consented, in lieu of a
meeting, to an additional restatement of the Company's Amended and Restated
Certificate of Incorporation. Such stockholder action was consented to by the
affirmative vote of the holders of approximately 119,586 shares of the
Company's Common Stock. On March 26, 1999, the Company's stockholders
consented, in lieu of a meeting, to the election of M. Shaun Lawson and Lee
Newbon to the Company's Board of Directors with each of Richard Block, Zenas
Block, David H. Horowitz, Melvin B. Herrin, H. Scott Herrin, Michael Gilligan
and Michel Reichert continuing as directors of the Company. Such stockholder
action was consented to by the affirmative vote of the holders of
approximately 132,735 shares of the Company's Common Stock.
ITEM 5: Other Information
None
ITEM 6: Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
3.3 Second Amended and Restated By-laws of the Company.*
3.5 Fourth Amended and Restated Certificate of Incorporation of the
Company.*
4.5 Second Supplemental Indenture, dated as of January 31, 1999, among
the Company, State Street Bank and Trust Company, as Trustee and
the Company's subsidiaries party thereto.
10.61 Second Amended and Restated Stockholder Agreement, dated as of
January 11, 1999, between the Company and its stockholders.*
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.62 Securities Purchase Agreement, dated January 11, 1999, between the
Company, BT Capital Investors, L.P. ("BT") and Phoenix Home Life
Mutual Insurance Company ("Phoenix").*
10.63 Warrant, dated January 11, 1999, issued to BT for the purchase of
the Company's common stock.*
10.64 Warrant, dated January 11, 1999, issued to Phoenix for the
purchase of the Company's common stock.*
10.69 Fifth Amendment to the Credit Facility, dated as of January 11,
1999, among BofA, the Company, AGI and Klearfold.*
10.83 First Amendment to Employment, Non-Competition and Stock
Repurchase Agreement , dated asof January 8, 1999, by and between
the Company and David C. Underwood.*
10.84 First Amendment to Employment, Non-Competition and Stock
Repurchase Agreement, dated as of January 8, 1999, by and between
the Company and Dean Henkel.*
10.85 Letter Agreement, dated as of January 7, 1999, between the Company
and certain employees.*
10.86 First Amendment to Employment, Non-Competition and Stock
Repurchase Agreement, dated as of January 8, 1999, by and between
the Company and Richard Oppenheimer.*
10.100 Letter Agreement, dated as of January 11, 1999, between Heritage
Fund II Investment Corporation and the Company.*
10.103 First Amendment to Employment, Non-Competition and Stock
Repurchase Agreement, dated as of January 13, 1999, by and between
the Company and Melvin B. Herrin.
10.104 First Amendment to Employment, Non-Competition and Stock
Repurchase Agreement, dated as of January 13, 1999, by and between
the Company and Richard Block.
10.105 First Amendment to Employment, Non-Competition and Stock
Repurchase Agreement, dated as of January 13, 1999, by and between
the Company and Jacqueline Barry.
10.106 First Amendment to Agreement Relating to Employment and Stock
Ownership, dated as of January 13, 1999, by and between the
Company and Craig Wilson.
10.107 First Amendment to Agreement Relating to Employment and Stock
Ownership, dated as of January 13, 1999, by and between the
Company and Richard Mazurek.
10.108 First Amendment to Agreement Relating to Employment and Stock
Ownership, dated as of January 13, 1999, by and between the
Company and Steve Frazier.
27.1 Financial Data Schedule.
</TABLE>
- --------
* Incorporated by reference to the same numbered exhibit to the Registrant's
Form 10-K filed by the
Registrant for the fiscal year ending December 31, 1998.
(b) Reports on Form 8-K
None
22
<PAGE>
Exhibit 4.5
SECOND SUPPLEMENTAL INDENTURE
Second Supplemental Indenture (this "Supplemental Indenture"), dated
as of January 31, 1999, among the companies identified on the signature pages
hereto as the "Guaranteeing Subsidiaries" (the "Guaranteeing Subsidiaries"),
each a Subsidiary (as defined in the Indenture referred to herein) of IMPAC
Group, Inc., a Delaware corporation (the "Company"), the Company, the other
Guarantors (as defined in the Indenture referred to herein), and State Street
Bank and Trust Company, as trustee under the indenture referred to below (the
"Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of March 12, 1998, as amended
by the First Supplemental Indenture, dated as of July 21, 1998, providing for
the issuance of an aggregate principal amount of up to $100.0 million of 10-1/8%
Senior Subordinated Notes due 2008 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances each
of the Guaranteeing Subsidiaries shall execute and deliver to the Trustee a
supplemental indenture pursuant to which each of the Guaranteeing Subsidiaries
shall unconditionally guarantee all of the Company's Obligations under the Notes
and the Indenture on the terms and conditions set forth herein (the "Subsidiary
Guarantees"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, each of
the Guaranteeing Subsidiaries and the Trustee mutually covenant and agree for
the equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. Each of the Guaranteeing Subsidiaries
hereby agree as follows:
(a) Along with all Guarantors named in the Indenture, to jointly and
severally Guarantee to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of
the Indenture, the Notes or the obligations of the Company
hereunder or thereunder, that:
(i) the principal of and interest on the Notes will be promptly
paid in full when due, whether at maturity, by acceleration,
<PAGE>
2
redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful,
and all other obligations of the Company to the Holders or
the Trustee hereunder or thereunder will be promptly paid in
full or performed, all in accordance with the terms hereof
and thereof; and
(ii) in case of any extension of time of payment or renewal of
any Notes or any of such other obligations, that same will
be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise. Failing
payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the
Guarantors shall be jointly and severally obligated to pay
the same immediately.
(b) The obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Notes or the
Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any
provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor.
(c) The following is hereby waived: diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency
or bankruptcy of the Company, any right to require a proceeding
first against the Company, protest, notice and all demands
whatsoever.
(d) Each of these Subsidiary Guarantees shall not be discharged
except by complete performance of the obligations contained in
the Notes and the Indenture.
(e) If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guarantors, or any
Custodian, Trustee, liquidator or other similar official acting
in relation to either the Company or the Guarantors, any amount
paid by either to the Trustee or such Holder, each of these
Subsidiary Guarantees, to the extent theretofore discharged,
shall be reinstated in full force and effect.
(f) Each of the Guaranteeing Subsidiaries shall not be entitled to
any right of subrogation in relation to the Holders in respect of
any obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby.
<PAGE>
3
(g) As between the Guarantors, on the one hand, and the Holders and
the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in
Article 6 of the Indenture for the purposes of each of these
Subsidiary Guarantees, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such obligations as provided in
Article 6 of the Indenture, such obligations (whether or not due
and payable) shall forthwith become due and payable by the
Guarantors for the purpose of each of these Subsidiary
Guarantees.
(h) The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does
not impair the rights of the Holders under the Guarantee.
(i) The obligations hereunder shall be subject to the subordination
provisions set forth in Article 10 of the Indenture.
3. Execution and Delivery. Each Guaranteeing Subsidiary agrees that
the Subsidiary Guarantees shall remain in full force and effect notwithstanding
any failure to endorse on each Note a notation of such Subsidiary Guarantee.
4. Guaranteeing Subsidiary May Consolidate, Etc. on Certain Terms.
(a) Each of the Guaranteeing Subsidiaries may not consolidate with or
merge with or into (whether or not such Guarantor is the
surviving Person) another corporation, Person or entity whether
or not affiliated with such Guarantor unless:
(i) subject to Section 11.05 and 11.06 of the Indenture, the
Person formed by or surviving any such consolidation or
merger (if other than a Guarantor or the Company)
unconditionally assumes all the obligations of such
Guarantor, pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee, under the
Notes, the Indenture and the Subsidiary Guarantee on the
terms set forth therein or therein;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists; and
(iii)except in the case of a merger of a Guarantor with or into
another Guarantor or a merger of a Guarantor with or into
the Company, the Company would be permitted by virtue of the
Company's pro forma Fixed Charge Coverage Ratio, immediately
after giving effect to such transaction, to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed
<PAGE>
4
Charge Coverage Ratio test set forth in Section 4.09 of the
Indenture.
(b) In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory
in form to the Trustee, of the Subsidiary Guarantee endorsed upon
the Notes and the due and punctual performance of all of the
covenants and conditions of the Indenture to be performed by the
Guarantor, such successor corporation shall succeed to and be
substituted for the Guarantor with the same effect as if it had
been named herein as a Guarantor. Such successor corporation
thereupon may cause to be signed any or all of the Subsidiary
Guarantees to be endorsed upon all of the Notes issuable under
the Indenture which theretofore shall not have been signed by the
Company and delivered to the Trustee. All the Subsidiary
Guarantees so issued shall in all respects have the same legal
rank and benefit under the Indenture as the Subsidiary Guarantees
theretofore and thereafter issued in accordance with the terms of
the Indenture as though all of such Subsidiary Guarantees had
been issued at the date of the execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Indenture, and
notwithstanding clauses (a) and (b) above, nothing contained in
the Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into the Company
or another Guarantor, or shall prevent any sale or conveyance of
the property of a Guarantor as an entirety or substantially as an
entirety to the Company or another Guarantor.
5. Releases.
--------
(a) In the event of a sale or other disposition of all of the assets
of any Guarantor, by way of merger, consolidation or otherwise,
or a sale or other disposition of all to the Capital Stock of any
Guarantor (other than to the Company or another Guarantor), then
such Guarantor (in the event of a sale or other disposition, by
way of merger, consolidation or otherwise, of all of the Capital
Stock of such Guarantor (other than to the Company or another
Guarantor)) or the corporation acquiring the property (in the
event of a sale or other disposition of all or substantially all
of the assets of such Guarantor) will be released and relieved of
any obligations under its Subsidiary Guarantee and any such
acquiring corporation will not be required to assume any
obligations of such Guarantor under the applicable Subsidiary
Guarantee; provided that such sale or other disposition complies
with all applicable provisions of the Indenture including,
without limitation, Section 4.10 thereof. Upon delivery by the
Company to the Trustee of an Officers' Certificate and an Opinion
of
<PAGE>
5
Counsel to the effect that such sale or other disposition was
made by the Company in accordance with the provisions of the
Indenture, including without limitation Section 4.10 of the
Indenture, the Trustee shall execute any documents reasonably
required in order to evidence the release of any Guarantor from
its obligations under its Subsidiary Guarantee.
(b) Any Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount of
principal of and interest on the Notes and for the other
obligations of any Guarantor under the Indenture as provided in
Article 11 of the Indenture.
6. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator, stockholder or agent of each of the
Guaranteeing Subsidiaries, as such, shall have any liability for any obligations
of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary
Guarantees, the Indenture or this Supplemental Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of the Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the Notes.
Such waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the SEC that such a waiver is against
public policy.
7. New York Law to Govern. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
8. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
10. The Trustee. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by each of the Guaranteeing Subsidiaries and the
Company.
<PAGE>
6
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
SIGNATURES
COMPANY:
IMPAC GROUP, INC.
By: /s/ David C. Underwood
-----------------------------
Name: David C. Underwood
Title: Chief Financial Officer
EXISTING GUARANTORS:
KLEARFOLD, INC., as Guarantor
By: /s/ David C. Underwood
-----------------------------
Name: David C. Underwood
Title: Chief Financial Officer
AGI INCORPORATED, as Guarantor
By: /s/ David C. Underwood
-----------------------------
Name: David C. Underwood
Title: Chief Financial Officer
KF-INTERNATIONAL, INC., as
Guarantor
By: /s/ David C. Underwood
-----------------------------
Name: David C. Underwood
Title: Chief Financial Officer
KF-DELAWARE, INC., as Guarantor
By: /s/ David C. Underwood
-----------------------------
Name: David C. Underwood
Title: Chief Financial Officer
<PAGE>
7
TRUSTEE:
State Street Bank And Trust
Company, as Trustee
By: /s/ Arthur J. MacDonald
-----------------------------
Name: Arthur J. MacDonald
Title: Vice President
GUARANTEEING SUBSIDIARIES:
TINSLEY ROBOR LIMITED, as
Guarantor
By: /s/ Anthony John Smith /s/ Lee Newbon
----------------------- -------------------
Name: Anthony John Smith Lee Newbon
Title: Secretary Director
JAMES UPTON LIMITED, as
Guarantor
By: /s/ Anthony John Smith /s/ Lee Newbon
----------------------- -------------------
Name: Anthony John Smith Lee Newbon
Title: Secretary Director
TINSLEY ROBOR AUDIO AND COMPUTER SERVICES
LIMITED, as Guarantor
By: /s/ Anthony John Smith /s/ Lee Newbon
----------------------- -------------------
Name: Anthony John Smith Lee Newbon
Title: Secretary Director
TINSLEY ROBOR LABELS
LIMITED, as Guarantor
By: /s/ Anthony John Smith /s/ Lee Newbon
----------------------- -------------------
Name: Anthony John Smith Lee Newbon
Title: Secretary Director
<PAGE>
8
TINSLEY ROBOR SALES LIMITED,
as Guarantor
By: /s/ Anthony John Smith /s/ Lee Newbon
----------------------- -------------------
Name: Anthony John Smith Lee Newbon
Title: Secretary Director
SONICON LIMITED, as Guarantor
By: /s/ Anthony John Smith /s/ Lee Newbon
----------------------- -------------------
Name: Anthony John Smith Lee Newbon
Title: Secretary Director
TOPHURST PROPERTIES LIMITED,
as Guarantor
By: /s/ Anthony John Smith /s/ Diane Williams
----------------------- -------------------
Name: Anthony John Smith Diane Williams
Title: Secretary Director
TINSLEY ROBOR (OVERSEAS)
LIMITED, as Guarantor
By: /s/ Anthony John Smith /s/ Diane Williams
----------------------- -------------------
Name: Anthony John Smith Diane Williams
Title: Secretary Director
PINEPOINT LIMITED, as Guarantor
By:
-----------------------------
Name:
Title:
PRINTING RESOURCES LIMITED, as Guarantor
By: Donal Forsyth
-----------------------------
Name:
Title: General Manager/Director
<PAGE>
9
IMPAC EUROPE LIMITED, as Guarantor
By: /s/ Anthony John Smith /s/ Lee Newbon
----------------------- -------------------
Name: Anthony John Smith Lee Newbon
Title: Secretary Director
LEVELPROMPT LIMITED, as Guarantor
By: /s/ Anthony John Smith /s/ Lee Newbon
----------------------- -------------------
Name: Anthony John Smith Lee Newbon
Title: Secretary Director
<PAGE>
Exhibit 10.103
FIRST AMENDMENT TO
EMPLOYMENT, NON-COMPETITION
AND STOCK REPURCHASE AGREEMENT
This First Amendment to Employment, Non-Competition and Stock Repurchase
Agreement (this "Amendment Agreement") is dated as of January 13, 1999, is made
by and between IMPAC Group, Inc., a Delaware corporation, with its principal
executive offices at 1950 North Ruby Street, Melrose Park, Illinois 60160-1178
(the "Company"), and Melvin B. Herrin (the "Employee"), and amends that certain
Employment, Non-Competition and Stock Repurchase Agreement, dated as of March
12, 1998, by and between the Company and the Employee (the "Employment
Agreement").
WHEREAS, this Amendment Agreement is being entered into in connection with
(a) the letter agreement dated as of January 7, 1999 between the Company, the
Employee and the other current or former officers and employees named therein
(the "January Letter Agreement"), and (b) the Company's Fourth Amended and
Restated Certificate of Incorporation filed with the Secretary of State of the
State of Delaware (the "Charter Amendment"); and
WHEREAS, pursuant to the Charter Amendment, certain additional restrictions
are being placed on the Company's ability to make payments in cash of the
repurchase price for Shares (as defined in the Employment Agreement) being
repurchased by the Company under the terms of the Employment Agreement;
WHEREAS, in the January Letter Agreement the Employee and the Company
agreed to enter in this Amendment Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and the Employee agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
have the respective meanings ascribed to them in the Employment Agreement.
2. Amendments. Effective as of January 13, 1999, the Employment Agreement
shall be amended as follows:
2.1. Section 1 (Definitions) shall be amended by adding the following new
definitions in the appropriate alphabetical order:
<PAGE>
-2-
"Subordinating Agreement" has the meaning specified in Section 7.1(a)
hereof."
2.2. Section 7.1(a) shall be amended by deleting it in its entirety, and
substituting therefor the following:
"(a) Repurchase Terms. Notwithstanding any provision to the contrary in
Section 6 above, if the Company is prohibited by the terms of the Company's
Charter, as in effect from time to time, or any of the Company's or any of
its Subsidiaries' agreements with its or their lenders (including, without
limitation, the Company's senior credit agreement with Bank of America
National Trust & Savings Association, as Agent, and the Indenture with
respect to the Company's Senior Subordinated Notes) (with the Charter and
any such agreement each being referred to herein as a "Subordinating
Agreement") from making any payments of any portion of the repurchase price
for any of the Shares in cash, the Company shall be entitled to complete
the repurchase of such Shares as to which payment of the repurchase price
in cash is not so prohibited by delivering to the Employee a check for the
repurchase price thereof. The Company further shall be entitled to complete
the repurchase of the other Shares to be repurchased by it, or any portion
thereof, on the first date on which such payment is not so prohibited by
any applicable Subordinating Agreement, provided that if the closing date
of such repurchase is more than six (6) months after the Employee's
Termination of Employment, then, if the repurchase price for the Shares is
based on the Market Value Per Share, the repurchase price shall be
calculated based on the Market Value Per Share as of the date of such
closing instead of as of the date of the Employee's Termination of
Employment. The Company agrees that in the event that it is permitted by
the terms of any Subordinating Agreement to repurchase shares of its Common
Stock in cash, it shall promptly exercise its rights to complete any such
repurchase delayed pursuant to this Section 7.1(a), provided that any such
repurchase shall be pro rata with all other such delayed repurchases and
then-current repurchases, whether hereunder or under any other employment
or stock repurchase agreement of the Company in force from time to time."
<PAGE>
-3-
3. Miscellaneous.
(a) No Other Amendment. Except as otherwise expressly provided by this
Amendment Agreement, all of the terms, conditions and provisions of the
Employment Agreement shall continue in full force and effect. This Amendment
Agreement and the Employment Agreement shall be read and construed as one
instrument.
(b) Counterparts. This Amendment Agreement may be executed by the parties
in separate counterparts, each of which when so executed and delivered shall be
an original, but all of which together shall constitute one and the same
agreement. In pleading or proving this Amendment Agreement, it shall not be
necessary to produce or account for more than one such counterpart.
(c) Captions. The captions of sections or subsections of this Amendment
Agreement are for reference only and shall not affect the interpretation or
construction of this Amendment Agreement.
(d) Construction. The language used in this Amendment Agreement is the
language chosen by the parties to express their mutual intent, and no rule of
strict construction shall be applied against either party.
(e) Governing Law. This Amendment Agreement shall to the maximum lawful
extent be governed by and interpreted and construed in accordance with the
internal laws of the Commonwealth of Pennsylvania, as applied to contracts under
seal made, and entirely to be performed, within Pennsylvania, and without
reference to principles of conflicts or choice of law.
<PAGE>
-4-
IN WITNESS WHEREOF, each of the Company and the Employee has executed and
delivered this First Amendment to Employment, Non-Competition and Stock
Repurchase Agreement as an agreement under seal as of the date first above
written.
COMPANY: IMPAC GROUP, INC.
By /s/ Richard Block
-----------------------
Name: Richard Block
Title: President
EMPLOYEE: /s/ Melvin B. Herrin
--------------------------
Name: Melvin B. Herrin
<PAGE>
Exhibit 10.104
FIRST AMENDMENT TO
EMPLOYMENT, NON-COMPETITION
AND STOCK REPURCHASE AGREEMENT
This First Amendment to Employment, Non-Competition and Stock Repurchase
Agreement (this "Amendment Agreement") is dated as of January 13, 1999, is made
by and between IMPAC Group, Inc., a Delaware corporation, with its principal
executive offices at 1950 North Ruby Street, Melrose Park, Illinois 60160-1178
(the "Company"), and Richard Block (the "Employee"), and amends that certain
Employment, Non-Competition and Stock Repurchase Agreement, dated as of March
12, 1998, by and between the Company and the Employee (the "Employment
Agreement").
WHEREAS, this Amendment Agreement is being entered into in connection with
(a) the letter agreement dated as of January 7, 1999 between the Company, the
Employee and the other current or former officers and employees named therein
(the "January Letter Agreement"), and (b) the Company's Fourth Amended and
Restated Certificate of Incorporation filed with the Secretary of State of the
State of Delaware (the "Charter Amendment"); and
WHEREAS, pursuant to the Charter Amendment, certain additional restrictions
are being placed on the Company's ability to make payments in cash of the
repurchase price for Shares (as defined in the Employment Agreement) being
repurchased by the Company under the terms of the Employment Agreement;
WHEREAS, in the January Letter Agreement the Employee and the Company
agreed to enter in this Amendment Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and the Employee agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
have the respective meanings ascribed to them in the Employment Agreement.
2. Amendments. Effective as of January 13, 1999, the Employment Agreement
shall be amended as follows:
2.1. Section 1 (Definitions) shall be amended by adding the following new
definitions in the appropriate alphabetical order:
<PAGE>
-2-
"Subordinating Agreement" has the meaning specified in Section 7.1(a)(y)
hereof."
2.2. Section 7.1(a)(y) shall be amended by deleting it in its entirety, and
substituting therefor the following:
"if the Company is prohibited by the terms of the Company's Charter, as in
effect from time to time, or any of the Company's or any of its
Subsidiaries' agreements with its or their lenders (including, without
limitation, the Company's senior credit agreement with Bank of America
National Trust & Savings Association, as Agent, and the Indenture with
respect to the Company's Senior Subordinated Notes) (with the Charter and
any such agreement each being referred to herein as a "Subordinating
Agreement") from making any payments of any portion of the repurchase price
for any of the Shares in cash, the Company shall be entitled to complete
the repurchase of such Shares as to which payment of the repurchase price
in cash is not so prohibited by delivering to the Employee a check for the
repurchase price thereof. The Company further shall be entitled to complete
the repurchase of the other Shares to be repurchased by it, or any portion
thereof, on the first date on which such payment is not so prohibited by
any applicable Subordinating Agreement, provided that if the closing date
of such repurchase is more than six (6) months after the Employee's
Termination of Employment, then, if the repurchase price for the Shares is
based on the Market Value Per Share, the repurchase price shall be
calculated based on the Market Value Per Share as of the date of such
closing instead of as of the date of the Employee's Termination of
Employment."
3. Miscellaneous.
(a) No Other Amendment. Except as otherwise expressly provided by this
Amendment Agreement, all of the terms, conditions and provisions of the
Employment Agreement shall continue in full force and effect. This Amendment
Agreement and the Employment Agreement shall be read and construed as one
instrument.
(b) Counterparts. This Amendment Agreement may be executed by the parties
in separate counterparts, each of which when so executed and delivered shall be
an original, but all of which together shall constitute one and the same
agreement. In pleading or proving this Amendment
<PAGE>
-3-
Agreement, it shall not be necessary to produce or account for more than one
such counterpart.
(c) Captions. The captions of sections or subsections of this Amendment
Agreement are for reference only and shall not affect the interpretation or
construction of this Amendment Agreement.
(d) Construction. The language used in this Amendment Agreement is the
language chosen by the parties to express their mutual intent, and no rule of
strict construction shall be applied against either party.
(e) Governing Law. This Amendment Agreement shall to the maximum lawful
extent be governed by and interpreted and construed in accordance with the
internal laws of the State of Illinois, as applied to contracts under seal made,
and entirely to be performed, within Illinois, and without reference to
principles of conflicts or choice of law.
<PAGE>
-4-
IN WITNESS WHEREOF, each of the Company and the Employee has executed and
delivered this First Amendment to Employment, Non-Competition and Stock
Repurchase Agreement as an agreement under seal as of the date first above
written.
COMPANY: IMPAC GROUP, INC.
By /s/ David C. Underwood
------------------------
Name: David C. Underwood
Title: Chief Financial Officer
EMPLOYEE: /s/ Richard Block
--------------------------
Name: Richard Block
<PAGE>
Exhibit 10.105
FIRST AMENDMENT TO
EMPLOYMENT, NON-COMPETITION
AND STOCK REPURCHASE AGREEMENT
This First Amendment to Employment, Non-Competition and Stock Repurchase
Agreement (this "Amendment Agreement") is dated as of January 13, 1999, is made
by and between IMPAC Group, Inc., a Delaware corporation, with its principal
executive offices at 1950 North Ruby Street, Melrose Park, Illinois 60160-1178
(the "Company"), and Jacqueline Barry (the "Employee"), and amends that certain
Employment, Non-Competition and Stock Repurchase Agreement, dated as of March
12, 1998, by and between the Company and the Employee (the "Employment
Agreement").
WHEREAS, this Amendment Agreement is being entered into in connection with
(a) the letter agreement dated as of January 7, 1999 between the Company, the
Employee and the other current or former officers and employees named therein
(the "January Letter Agreement"), and (b) the Company's Fourth Amended and
Restated Certificate of Incorporation filed with the Secretary of State of the
State of Delaware (the "Charter Amendment"); and
WHEREAS, pursuant to the Charter Amendment, certain additional restrictions
are being placed on the Company's ability to make payments in cash of the
repurchase price for Shares (as defined in the Employment Agreement) being
repurchased by the Company under the terms of the Employment Agreement;
WHEREAS, in the January Letter Agreement the Employee and the Company
agreed to enter in this Amendment Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and the Employee agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
have the respective meanings ascribed to them in the Employment Agreement.
2. Amendments. Effective as of January 13, 1999, the Employment Agreement
shall be amended as follows:
2.1. Section 1 (Definitions) shall be amended by adding the following new
definitions in the appropriate alphabetical order:
<PAGE>
-2-
"Subordinating Agreement" has the meaning specified in Section 7.1(a)(y)
hereof."
2.2. Section 7.1(a)(y) shall be amended by deleting it in its entirety,
and substituting therefor the following:
"if the Company is prohibited by the terms of the Company's Charter, as in
effect from time to time, or any of the Company's or any of its
Subsidiaries' agreements with its or their lenders (including, without
limitation, the Company's senior credit agreement with Bank of America
National Trust & Savings Association, as Agent, and the Indenture with
respect to the Company's Senior Subordinated Notes) (with the Charter and
any such agreement each being referred to herein as a "Subordinating
Agreement") from making any payments of any portion of the repurchase price
for any of the Shares in cash, the Company shall be entitled to complete
the repurchase of such Shares as to which payment of the repurchase price
in cash is not so prohibited by delivering to the Employee a check for the
repurchase price thereof. The Company further shall be entitled to complete
the repurchase of the other Shares to be repurchased by it, or any portion
thereof, on the first date on which such payment is not so prohibited by
any applicable Subordinating Agreement, provided that if the closing date
of such repurchase is more than six (6) months after the Employee's
Termination of Employment, then, if the repurchase price for the Shares is
based on the Market Value Per Share, the repurchase price shall be
calculated based on the Market Value Per Share as of the date of such
closing instead of as of the date of the Employee's Termination of
Employment."
3. Miscellaneous.
(a) No Other Amendment. Except as otherwise expressly provided by this
Amendment Agreement, all of the terms, conditions and provisions of the
Employment Agreement shall continue in full force and effect. This Amendment
Agreement and the Employment Agreement shall be read and construed as one
instrument.
(b) Counterparts. This Amendment Agreement may be executed by the parties
in separate counterparts, each of which when so executed and delivered shall be
an original, but all of which together shall constitute one and the same
agreement. In pleading or proving this Amendment
<PAGE>
-3-
Agreement, it shall not be necessary to produce or account for more than one
such counterpart.
(c) Captions. The captions of sections or subsections of this Amendment
Agreement are for reference only and shall not affect the interpretation or
construction of this Amendment Agreement.
(d) Construction. The language used in this Amendment Agreement is the
language chosen by the parties to express their mutual intent, and no rule of
strict construction shall be applied against either party.
(e) Governing Law. This Amendment Agreement shall to the maximum lawful
extent be governed by and interpreted and construed in accordance with the
internal laws of the State of Illinois, as applied to contracts under seal made,
and entirely to be performed, within Illinois, and without reference to
principles of conflicts or choice of law.
<PAGE>
-4-
IN WITNESS WHEREOF, each of the Company and the Employee has executed and
delivered this First Amendment to Employment, Non-Competition and Stock
Repurchase Agreement as an agreement under seal as of the date first above
written.
COMPANY: IMPAC GROUP, INC.
By /s/ Richard Block
---------------------------
Name: Richard Block
Title: President
EMPLOYEE: /s/ Jacqueline Barry
---------------------------
Name: Jacqueline Barry
<PAGE>
Exhibit 10.106
FIRST AMENDMENT TO
AGREEMENT RELATING TO EMPLOYMENT
AND STOCK OWNERSHIP
This First Amendment to Agreement Relating to Employment and Stock
Ownership (this "Amendment Agreement") is dated as of January 13, 1999, is made
by and between IMPAC Group, Inc., a Delaware corporation, with its principal
executive offices at 1950 North Ruby Street, Melrose Park, Illinois 60160-1178
(the "Company"), and Craig Wilson (the "Employee"), and amends that certain
Agreement Relating to Employment and Stock Ownership dated as of March 12, 1998,
by and between the Company and the Employee (the "Employment Agreement").
WHEREAS, this Amendment Agreement is being entered into in connection with
(a) the letter agreement dated as of January 7, 1999 between the Company, the
Employee and the other current or former officers and employees named therein
(the "January Letter Agreement"), and (b) the Company's Fourth Amended and
Restated Certificate of Incorporation filed with the Secretary of State of the
State of Delaware (the "Charter Amendment"); and
WHEREAS, pursuant to the Charter Amendment, certain additional restrictions
are being placed on the Company's ability to make payments in cash of the
repurchase price for Shares (as defined in the Employment Agreement) being
repurchased by the Company under the terms of the Employment Agreement;
WHEREAS, in the January Letter Agreement the Employee and the Company
agreed to enter in this Amendment Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and the Employee agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
have the respective meanings ascribed to them in the Employment Agreement.
2. Amendments. Effective as of January 13, 1999, the Employment Agreement
shall be amended as follows:
2.1. Section 1 (Definitions) shall be amended by adding the following new
definitions in the appropriate alphabetical order:
<PAGE>
-2-
"Subordinating Agreement" has the meaning specified in Section 5.1(a)
hereof."
2.2. Section 5.1(a) shall be amended by deleting it in its entirety, and
substituting therefor the following:
"(a) Repurchase Terms. Notwithstanding any provision to the contrary in
Section 4 above, the Co-Managers and the Company shall be entitled to
complete the repurchase of such Shares by delivering to the Employee the
purchase price as follows in the event of a Termination of Employment by
the Company for Cause or voluntarily by the Employee without Good Reason:
(x) in cash, in an amount equal to the number of shares being purchased
multiplied by the lesser of (i) the Original Price Per Share and (ii) the
Market Price Per Share; and (y) a promissory note in the original principal
amount of the balance, if any, of the repurchase price. Unless otherwise
required by any of the Company's or any of its Subsidiaries' agreements
with its or their lenders, any promissory note delivered pursuant to this
Section 5.1 shall (i) bear interest at the Prime Rate as published from
time to time in the "Wall Street Journal", (ii) provide for the payment of
the principal evidenced thereby in not more than twelve (12) equal
quarterly installments commencing three (3) months after such repurchase,
(iii) be subordinated to the Company's indebtedness to its lenders on terms
satisfactory to such lenders, and (iv) provide for the payment in full of
the principal evidenced thereby upon any Disposition Event or Public
Offering. Notwithstanding any provision to the contrary in Section 4 above,
if the Company is prohibited by the terms of the Company's Charter, as in
effect from time to time, or any of the Company's or any of its
Subsidiaries' agreements with its or their lenders (including, without
limitation, the Company's senior credit agreement with Bank of America
National Trust & Savings Association, as Agent, and the Indenture with
respect to the Company's Senior Subordinated Notes) (with the Charter and
any such agreement each being referred to herein as a "Subordinating
Agreement") from making any payments of any portion of the repurchase price
for any of the Shares in cash, the Company shall be entitled to complete
the repurchase of such Shares as to which payment of the repurchase price
in cash is not so prohibited by delivering to the Employee a check for the
repurchase price thereof. The Company further shall be entitled to complete
the repurchase of the other Shares to be repurchased by it, or any portion
thereof, on the first date on which such payment is not so prohibited by
any applicable Subordinating Agreement, provided that if the closing date
of such
<PAGE>
-3-
repurchase is more than six (6) months after the Employee's Termination of
Employment, then, if the repurchase price for the Shares is based on the
Market Value Per Share, the repurchase price shall be calculated based on
the Market Value Per Share as of the date of such closing instead of as of
the date of the Employee's Termination of Employment. The Company agrees
that in the event that it is permitted by the terms of any Subordinating
Agreement to repurchase shares of its Common Stock in cash, it shall
promptly exercise its rights to complete any such repurchase delayed
pursuant to this Section 5.1(a), provided that any such repurchase shall be
pro rata with all other such delayed repurchases (but not including any
repurchases required to be completed in installments pursuant to the first
sentence of this Section 5.1(a))."
3. Miscellaneous.
(a) No Other Amendment. Except as otherwise expressly provided by this
Amendment Agreement, all of the terms, conditions and provisions of the
Employment Agreement shall continue in full force and effect. This Amendment
Agreement and the Employment Agreement shall be read and construed as one
instrument.
(b) Counterparts. This Amendment Agreement may be executed by the parties
in separate counterparts, each of which when so executed and delivered shall be
an original, but all of which together shall constitute one and the same
agreement. In pleading or proving this Amendment Agreement, it shall not be
necessary to produce or account for more than one such counterpart.
(c) Captions. The captions of sections or subsections of this Amendment
Agreement are for reference only and shall not affect the interpretation or
construction of this Amendment Agreement.
(d) Construction. The language used in this Amendment Agreement is the
language chosen by the parties to express their mutual intent, and no rule of
strict construction shall be applied against either party.
(e) Governing Law. This Amendment Agreement shall to the maximum lawful
extent be governed by and interpreted and construed in accordance with the
internal laws of the Commonwealth of Pennsylvania, as applied to contracts under
seal made, and entirely to be performed, within Pennsylvania, and without
reference to principles of conflicts or choice of law.
<PAGE>
-4-
IN WITNESS WHEREOF, each of the Company and the Employee has executed and
delivered this First Amendment to Agreement Relating to Employment and Stock
Ownership as an agreement under seal as of the date first above written.
COMPANY: IMPAC GROUP, INC.
By /s/ Richard Block
------------------------
Name: Richard Block
Title: President
EMPLOYEE: /s/ Craig Wilson
-------------------------
Name: Craig Wilson
<PAGE>
Exhibit 10.107
FIRST AMENDMENT TO
AGREEMENT RELATING TO EMPLOYMENT
AND STOCK OWNERSHIP
This First Amendment to Agreement Relating to Employment and Stock
Ownership (this "Amendment Agreement") is dated as of January 13, 1999, is made
by and between IMPAC Group, Inc., a Delaware corporation, with its principal
executive offices at 1950 North Ruby Street, Melrose Park, Illinois 60160-1178
(the "Company"), and Richard Mazurek (the "Employee"), and amends that certain
Agreement Relating to Employment and Stock Ownership dated as of March 12, 1998,
by and between the Company and the Employee (the "Employment Agreement").
WHEREAS, this Amendment Agreement is being entered into in connection with
(a) the letter agreement dated as of January 7, 1999 between the Company, the
Employee and the other current or former officers and employees named therein
(the "January Letter Agreement"), and (b) the Company's Fourth Amended and
Restated Certificate of Incorporation filed with the Secretary of State of the
State of Delaware (the "Charter Amendment"); and
WHEREAS, pursuant to the Charter Amendment, certain additional restrictions
are being placed on the Company's ability to make payments in cash of the
repurchase price for Shares (as defined in the Employment Agreement) being
repurchased by the Company under the terms of the Employment Agreement;
WHEREAS, in the January Letter Agreement the Employee and the Company
agreed to enter in this Amendment Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and the Employee agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
have the respective meanings ascribed to them in the Employment Agreement.
2. Amendments. Effective as of January 13, 1999, the Employment Agreement
shall be amended as follows:
2.1. Section 1 (Definitions) shall be amended by adding the following new
definitions in the appropriate alphabetical order:
<PAGE>
-2-
"Subordinating Agreement" has the meaning specified in Section 5.1(a)
hereof."
2.2. Section 5.1(a) shall be amended by deleting it in its entirety, and
substituting therefor the following:
"(a) Repurchase Terms. Notwithstanding any provision to the contrary in
Section 4 above, the Co-Managers and the Company shall be entitled to
complete the repurchase of such Shares by delivering to the Employee the
purchase price as follows in the event of a Termination of Employment by
the Company for Cause or voluntarily by the Employee without Good Reason:
(x) in cash, in an amount equal to the number of shares being purchased
multiplied by the lesser of (i) the Original Price Per Share and (ii) the
Market Price Per Share; and (y) a promissory note in the original principal
amount of the balance, if any, of the repurchase price. Unless otherwise
required by any of the Company's or any of its Subsidiaries' agreements
with its or their lenders, any promissory note delivered pursuant to this
Section 5.1 shall (i) bear interest at the Prime Rate as published from
time to time in the "Wall Street Journal", (ii) provide for the payment of
the principal evidenced thereby in not more than twelve (12) equal
quarterly installments commencing three (3) months after such repurchase,
(iii) be subordinated to the Company's indebtedness to its lenders on terms
satisfactory to such lenders, and (iv) provide for the payment in full of
the principal evidenced thereby upon any Disposition Event or Public
Offering. Notwithstanding any provision to the contrary in Section 4 above,
if the Company is prohibited by the terms of the Company's Charter, as in
effect from time to time, or any of the Company's or any of its
Subsidiaries' agreements with its or their lenders (including, without
limitation, the Company's senior credit agreement with Bank of America
National Trust & Savings Association, as Agent, and the Indenture with
respect to the Company's Senior Subordinated Notes) (with the Charter and
any such agreement each being referred to herein as a "Subordinating
Agreement") from making any payments of any portion of the repurchase price
for any of the Shares in cash, the Company shall be entitled to complete
the repurchase of such Shares as to which payment of the repurchase price
in cash is not so prohibited by delivering to the Employee a check for the
repurchase price thereof. The Company further shall be entitled to complete
the repurchase of the other Shares to be repurchased by it, or any portion
thereof, on the first date on which such payment is not so prohibited by
any applicable Subordinating Agreement, provided that if the closing date
of such
<PAGE>
-3-
repurchase is more than six (6) months after the Employee's Termination of
Employment, then, if the repurchase price for the Shares is based on the
Market Value Per Share, the repurchase price shall be calculated based on
the Market Value Per Share as of the date of such closing instead of as of
the date of the Employee's Termination of Employment. The Company agrees
that in the event that it is permitted by the terms of any Subordinating
Agreement to repurchase shares of its Common Stock in cash, it shall
promptly exercise its rights to complete any such repurchase delayed
pursuant to this Section 5.1(a), provided that any such repurchase shall be
pro rata with all other such delayed repurchases (but not including any
repurchases required to be completed in installments pursuant to the first
sentence of this Section 5.1(a))."
3. Miscellaneous.
(a) No Other Amendment. Except as otherwise expressly provided by this
Amendment Agreement, all of the terms, conditions and provisions of the
Employment Agreement shall continue in full force and effect. This Amendment
Agreement and the Employment Agreement shall be read and construed as one
instrument.
(b) Counterparts. This Amendment Agreement may be executed by the parties
in separate counterparts, each of which when so executed and delivered shall be
an original, but all of which together shall constitute one and the same
agreement. In pleading or proving this Amendment Agreement, it shall not be
necessary to produce or account for more than one such counterpart.
(c) Captions. The captions of sections or subsections of this Amendment
Agreement are for reference only and shall not affect the interpretation or
construction of this Amendment Agreement.
(d) Construction. The language used in this Amendment Agreement is the
language chosen by the parties to express their mutual intent, and no rule of
strict construction shall be applied against either party.
(e) Governing Law. This Amendment Agreement shall to the maximum lawful
extent be governed by and interpreted and construed in accordance with the
internal laws of the Commonwealth of Pennsylvania, as applied to contracts under
seal made, and entirely to be performed, within Pennsylvania, and without
reference to principles of conflicts or choice of law.
<PAGE>
-4-
IN WITNESS WHEREOF, each of the Company and the Employee has executed and
delivered this First Amendment to Agreement Relating to Employment and Stock
Ownership as an agreement under seal as of the date first above written.
COMPANY: IMPAC GROUP, INC.
By /s/ Richard Block
---------------------------
Name: Richard Block
Title: President
EMPLOYEE: By /s/ Richard Mazurek
---------------------------
Name: Richard Mazurek
<PAGE>
Exhibit 10.108
FIRST AMENDMENT TO
AGREEMENT RELATING TO EMPLOYMENT
AND STOCK OWNERSHIP
This First Amendment to Agreement Relating to Employment and Stock
Ownership (this "Amendment Agreement") is dated as of January 13, 1999, is made
by and between IMPAC Group, Inc., a Delaware corporation, with its principal
executive offices at 1950 North Ruby Street, Melrose Park, Illinois 60160-1178
(the "Company"), and Steve Frazier (the "Employee"), and amends that certain
Agreement Relating to Employment and Stock Ownership dated as of March 12, 1998,
by and between the Company and the Employee (the "Employment Agreement").
WHEREAS, this Amendment Agreement is being entered into in connection with
(a) the letter agreement dated as of January 7, 1999 between the Company, the
Employee and the other current or former officers and employees named therein
(the "January Letter Agreement"), and (b) the Company's Fourth Amended and
Restated Certificate of Incorporation filed with the Secretary of State of the
State of Delaware (the "Charter Amendment"); and
WHEREAS, pursuant to the Charter Amendment, certain additional restrictions
are being placed on the Company's ability to make payments in cash of the
repurchase price for Shares (as defined in the Employment Agreement) being
repurchased by the Company under the terms of the Employment Agreement;
WHEREAS, in the January Letter Agreement the Employee and the Company
agreed to enter in this Amendment Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and the Employee agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
have the respective meanings ascribed to them in the Employment Agreement.
2. Amendments. Effective as of January 13, 1999, the Employment Agreement
shall be amended as follows:
2.1. Section 1 (Definitions) shall be amended by adding the following new
definitions in the appropriate alphabetical order:
<PAGE>
-2-
"Subordinating Agreement" has the meaning specified in Section 5.1(a)
hereof."
2.2. Section 5.1(a) shall be amended by deleting it in its entirety, and
substituting therefor the following:
"(a) Repurchase Terms. Notwithstanding any provision to the contrary in
Section 4 above, the Co-Managers and the Company shall be entitled to
complete the repurchase of such Shares by delivering to the Employee the
purchase price as follows in the event of a Termination of Employment by
the Company for Cause or voluntarily by the Employee without Good Reason:
(x) in cash, in an amount equal to the number of shares being purchased
multiplied by the lesser of (i) the Original Price Per Share and (ii) the
Market Price Per Share; and (y) a promissory note in the original principal
amount of the balance, if any, of the repurchase price. Unless otherwise
required by any of the Company's or any of its Subsidiaries' agreements
with its or their lenders, any promissory note delivered pursuant to this
Section 5.1 shall (i) bear interest at the Prime Rate as published from
time to time in the "Wall Street Journal", (ii) provide for the payment of
the principal evidenced thereby in not more than twelve (12) equal
quarterly installments commencing three (3) months after such repurchase,
(iii) be subordinated to the Company's indebtedness to its lenders on terms
satisfactory to such lenders, and (iv) provide for the payment in full of
the principal evidenced thereby upon any Disposition Event or Public
Offering. Notwithstanding any provision to the contrary in Section 4 above,
if the Company is prohibited by the terms of the Company's Charter, as in
effect from time to time, or any of the Company's or any of its
Subsidiaries' agreements with its or their lenders (including, without
limitation, the Company's senior credit agreement with Bank of America
National Trust & Savings Association, as Agent, and the Indenture with
respect to the Company's Senior Subordinated Notes) (with the Charter and
any such agreement each being referred to herein as a "Subordinating
Agreement") from making any payments of any portion of the repurchase price
for any of the Shares in cash, the Company shall be entitled to complete
the repurchase of such Shares as to which payment of the repurchase price
in cash is not so prohibited by delivering to the Employee a check for the
repurchase price thereof. The Company further shall be entitled to complete
the repurchase of the other Shares to be repurchased by it, or any portion
thereof, on the first date on which such payment is not so prohibited by
any applicable Subordinating Agreement, provided that if the closing date
of such
<PAGE>
-3-
repurchase is more than six (6) months after the Employee's Termination of
Employment, then, if the repurchase price for the Shares is based on the
Market Value Per Share, the repurchase price shall be calculated based on
the Market Value Per Share as of the date of such closing instead of as of
the date of the Employee's Termination of Employment. The Company agrees
that in the event that it is permitted by the terms of any Subordinating
Agreement to repurchase shares of its Common Stock in cash, it shall
promptly exercise its rights to complete any such repurchase delayed
pursuant to this Section 5.1(a), provided that any such repurchase shall be
pro rata with all other such delayed repurchases (but not including any
repurchases required to be completed in installments pursuant to the first
sentence of this Section 5.1(a))."
3. Miscellaneous.
(a) No Other Amendment. Except as otherwise expressly provided by this
Amendment Agreement, all of the terms, conditions and provisions of the
Employment Agreement shall continue in full force and effect. This Amendment
Agreement and the Employment Agreement shall be read and construed as one
instrument.
(b) Counterparts. This Amendment Agreement may be executed by the parties
in separate counterparts, each of which when so executed and delivered shall be
an original, but all of which together shall constitute one and the same
agreement. In pleading or proving this Amendment Agreement, it shall not be
necessary to produce or account for more than one such counterpart.
(c) Captions. The captions of sections or subsections of this Amendment
Agreement are for reference only and shall not affect the interpretation or
construction of this Amendment Agreement.
(d) Construction. The language used in this Amendment Agreement is the
language chosen by the parties to express their mutual intent, and no rule of
strict construction shall be applied against either party.
(e) Governing Law. This Amendment Agreement shall to the maximum lawful
extent be governed by and interpreted and construed in accordance with the
internal laws of the Commonwealth of Pennsylvania, as applied to contracts under
seal made, and entirely to be performed, within Pennsylvania, and without
reference to principles of conflicts or choice of law.
<PAGE>
-4-
IN WITNESS WHEREOF, each of the Company and the Employee has executed and
delivered this First Amendment to Agreement Relating to Employment and Stock
Ownership as an agreement under seal as of the date first above written.
COMPANY: IMPAC GROUP, INC.
By /s/ Richard Block
-----------------------
Name: Richard Block
Title: President
EMPLOYEE: /s/ Steve Frazier
--------------------------
Name: Steve Frazier
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 8,358
<SECURITIES> 0
<RECEIVABLES> 48,037
<ALLOWANCES> 1,694
<INVENTORY> 23,820
<CURRENT-ASSETS> 85,107
<PP&E> 198,622
<DEPRECIATION> 93,386
<TOTAL-ASSETS> 363,466
<CURRENT-LIABILITIES> 53,105
<BONDS> 246,830
0
15,308
<COMMON> 0
<OTHER-SE> 42,439
<TOTAL-LIABILITY-AND-EQUITY> 363,466
<SALES> 64,191
<TOTAL-REVENUES> 64,191
<CGS> 46,535
<TOTAL-COSTS> 46,535
<OTHER-EXPENSES> 14,330
<LOSS-PROVISION> 177
<INTEREST-EXPENSE> 5,625
<INCOME-PRETAX> (2,296)
<INCOME-TAX> (502)
<INCOME-CONTINUING> (1,794)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,794)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
